Request for Exemptive Relief from the Clearing Rule for Certain Inter-Affiliate Transactions

Summary

SIFMA provided comments to the U.S. Securities and Exchange Commission (SEC) requesting that it grant exemptive relief pursuant to Section 36 of the Securities Exchange Act of 1934 ("Exchange Act") from certain provisions of 17 C.F.R. § 240.17ad-22 ("Clearing Rule").

Excerpt

This request for relief follows our October 2, 2024 and August 21, 2025 comment ¹ as well as extensive engagement by SIFMA and its members with SEC staff. As set out in further detail below, the requested relief is necessary and appropriate in the public interest, and is consistent with the protection of investors, because it would help support the resiliency and efficiency of the U.S. Treasury securities market.

Executive Summary

The requested relief would allow Direct Participants ² and their affiliates to enter into certain repurchase transactions on U.S. Treasury securities (a "Repo Transaction") ³ without being subject to a clearing requirement. While the Clearing Rule currently does provide an exemption from the clearing requirement for certain inter-affiliate Repo Transactions (the "Inter-Affiliate Exemption"), restrictions on its availability effectively negate its utility. In particular, only a limited number of affiliates are permitted to rely on the Inter-Affiliate Exemption (the "Limited Covered Affiliates"), and in order to use it, a Limited Covered Affiliate must centrally clear all outward-facing Repo Transactions (the "Outward-Facing Condition"). The requested relief would allow more inter-affiliate Repo Transactions to settle without central clearing, achieving the SEC's stated intent for including the Inter-Affiliate Exemption in the Clearing Rule and avoiding the deleterious consequences for financial markets that could result from requiring affiliates to clear Repo Transactions with their Direct Participants.

Accordingly, we request the SEC grant exemptive relief under Section 36 of the Exchange Act for inter-affiliate Repo Transactions as follows:

• Provide Exemptive Relief to Make the Inter-Affiliate Exemption Available to All Affiliates Except Investment Company Affiliates. We request that the SEC provide exemptive relief to make the Inter-Affiliate Exemption available to any affiliate of a Direct Participant (i.e., any counterparty that controls, is controlled by, or is under common control with the Direct Participant, and is GAAP-consolidated with the Direct Participant), except for an investment company entity, so that any such affiliate may enter into uncleared Repo Transactions with that Direct Participant. We refer to this request as the "Expanded Affiliated Counterparty Relief". This relief is crucial to permit firms to manage their internal treasury, liquidity, and collateral needs, as many firms use entities that are not Limited Covered Affiliates to move liquidity and collateral across the organization.